September 17, 1991

DEPARTMENT OF TAXATION ANNOUNCEMENT



RE:  INCOME TAX RELIEF FOR DISASTER LOSSES

In order to provide disaster assistance to those who have suffered losses or damage to property resulting from Hurricane Iniki, Governor John Waihee asked the President of the United States to proclaim the State of Hawaii a disaster area. As a result of the Presidential declaration, victims of Hurricane Iniki are entitled to the relief provided in the Disaster Relief Act of 1974.

For purposes of the Hawaii Income Tax Law, you may claim all of the casualty loss deductions allowed by Section 165 of the Internal Revenue Code. Casualty losses on business property are deductible in full. A loss on nonbusiness property is deductible to the extent it exceeds $100.00 plus 10 percent of adjusted gross income. The following options are available after you have determined the amount of your losses:
 

1. As a result of the Presidential declaration, you may elect to amend your 1991 income tax return and deduct the losses in that year and receive a refund for taxes paid; or
2. You may elect to deduct the losses on your 1992 income tax return; or
3. You may elect to deduct the losses in five (5) equal installments over a period of five (5) consecutive years, beginning with your income tax return for 1992; or
4. If your casualty or theft losses are more than your income, you may have a net operating loss. A net operating loss may be used to lower your taxes in an earlier year, allowing you to receive a refund for taxes that you have already paid. Or a net operating loss may be used to lower your taxes in a later year. You do not have to be a business to claim this benefit; all taxpayers may claim this carryback or carryover net operating loss.


EXAMPLE: If you elect to deduct your losses on your 1992 return, you may carryback your unused losses to 1989 (3 year carryback) or carryover your unused losses to 2007 (15 year carryover). If you wish, you may elect, on a timely filed tax return, to forego the carryback and use only the fifteen-year carryover loss provision.

PLEASE CONTACT YOUR NEAREST DISTRICT TAX OFFICE OF THE DEPARTMENT OF TAXATION SHOULD YOU HAVE ANY QUESTIONS OR IF YOU NEED FURTHER ASSISTANCE.
 
 

/s/
RICHARD F.KAHLE, JR.
Director of Taxation